Tech Data Corp.
) is scheduled to release its fiscal second quarter 2013 results
before the market opens on August 21, 2012.
In the run up to the earnings release, there have
been a couple of negative estimate revisions. However, Tech
Data has outperformed the Zacks Consensus Estimate by an average of
6.76% over the last four quarters, and we expect this to continue
in the second quarter.
First Quarter Highlights
Tech Data reported mixed first quarter results. The bottom line
of $1.24 surpassed the Zacks Consensus Estimate of $1.17 and was up
20.4% on a year-over-year basis, aided by lower costs and margin
However, the company's top line of $5.89 billion not only missed
the Zacks Consensus Estimate of $6.18 billion, but was down 6.9% on
a year-over-year basis. Revenues declined due to unfavorable
foreign exchange rates, revised representation of sales of vendor
warranty services and certain fulfillment contracts.
For further details please read:
Tech Data Reports Mixed 1Q
Earnings Estimate Trends
Over the past 30 days, two out of nine analysts covering the
stock revised their estimates downward with no upward revision. The
Zacks Consensus Estimate for the second quarter dropped a couple of
cents to $1.18 per share in that time.
Analysts covering the stock expect a decline in the top line due
to weaker-than-expected demand in the PCs and servers segment.
Looking at the individual regions, the company's revenue mix is
highly skewed to Europe, which is reeling under economic pressure.
This will act as a headwind going forward. Though the bottom
line of has outperformed the estimates of late; analysts expect a
slide in its earnings due to sluggish revenue.
We believe that Tech Data faces a number of headwinds in the
near term, including a volatile European market (approximately
60.0% of revenue) and a lack of visibility in U.S. government
spending. Moreover, it faces tough competition from
Ingram Micro Inc.
However, we believe that the company's profitability will be
driven by higher HDD pricing in the near term. Tech Data's strategy
of shifting resources from lower-performing regions to
higher-growth regions, cost reductions and accretive acquisitions
will drive growth over the long term.
Thus, we maintain our long-term Neutral recommendation on the
stock. Currently, the stock holds a Zacks #4 Rank, implying a
short-term 'Sell' rating.
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